Sky Trust

George W. Bush's recent about-face on the Kyoto Global Warming agreement suggests he remains devoted to an economy based on burning fossil fuels. Unfortunately, Nature is no longer willing to cooperate. The sky has now absorbed almost all the carbon waste it can safely hold. Sooner or later, America must come to terms with this raw fact. When we do, we'll need a system to constrain our carbon-burning habit while we preserve, to the maximum extent possible, the freedoms and comforts we now enjoy.

What might that system be? The ideal carbon emission reduction system should be (1) economy-wide, (2) market-based, (3) simple, (4) gradual, and (5) equitable. As it turns out, the best way to meet these guidelines is to treat the atmosphere as a commons, held in trust by all current citizens for the benefit of themselves and all future citizens. This is the so-called Sky Trust model, first described in YES! two years ago (See YES! Spring 1999). The alternatives are ineffective voluntary efforts, massive giveaways to oil companies, taxes that no politician will vote for, and/or complex regulatory regimes that most businesses will hate.

Modeled after the Alaska Permanent Fund (which pays all Alaskans equal yearly dividends from an investment fund built with state oil income), the Sky Trust would pay equal dividends to all Americans using revenue from carbon permit sales. Companies that bring carbon into the US economy would be required to purchase these permits at the wellhead, mine mouth, or port of entry. The total amount of carbon entering the economy (and eventually the atmosphere) would then be gradually reduced by cranking down the number of permits issued. No other rules or regulations would be needed.

Though consumers would pay higher prices for fossil fuels, they'd get money back at the end of the year. Those who use lots of fossil fuel would pay more in higher prices than they get back, while those who are frugal would get back more than they pay in. This isn't only fair, it's precisely the incentive needed to tame Americans' carbon consumption habit.

The logic behind the Sky Trust is impeccable. The difficulty lies in the politics of getting it established. The fight for the Alaska Permanent Fund was led by a visionary Republican governor, Jay Hammond. So far, no politician has stepped forward to lead the battle for the Sky Trust. The reason, however, isn't that dividends are politically unappealing; rather, it's that America still isn't ready to limit carbon emissions. When we are — when the argument shifts from whether to how to limit carbon emissions — the Sky Trust will find its champions, and many of them will be Republicans. They'll like the Sky Trust because it's market-based, involves no new taxes or regulations, and gives money back to the people.

If this sounds unlikely, recall that President George Bush the elder supported the Clean Air Act of 1990, which established a similar cap-and-trade system for sulfur emissions. And recall what happened when President Clinton tried to give broadcasters a large chunk of the electromagnetic spectrum. Senate Republican leader Bob Dole — backed by other Republicans, including John McCain — fought this giveaway of a common asset. “The [spectrum] belongs to all Americans equally,” Dole contended. “No more, no less.”

What's more, the Sky Trust has no connection to the Kyoto Protocol. For these reasons, it's the kind of plan even George W. Bush could embrace. At the very least, it would show Bush's critics that exempting carbon from traditional smokestack regulation wasn't such a bad idea after all.

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Peter Barnes co-founded Working Assets and is the author of Who Owns The Sky? (Island Press, 2001).